Will Europeans have to do without Ethiopian coffee? The Horn of Africa country where, according to legend, coffee cherries were first discovered a thousand years ago and where their cultivation became widespread from the 16th century, could be severely harmed by the new European Union (EU) regulations aimed at combating deforestation worldwide that are due to come into force on January 1st, 2025.
The law, voted in Brussels in 2023, specifically targets soy and palm oil crops, identified as the two biggest threats to tropical forests. In a few months, however, it will also force coffee importers to prove that their supply chains do not contribute to deforestation using satellite data and geographical coordinates.
These regulations are of particular concern in Kaffa, the region of origin of the coffee that gives the drink its name, and throughout southern Ethiopia. Providing accurate geographical surveys is a challenge for these 5 million or so smallholders: Internet coverage is poor in the villages, land registries are non-existent, and land disputes are legion. According to several Ethiopian diplomats and exporters, complying with the new European standards could take up to five years.
Buyers already turning away
According to the United Nations Food and Agriculture Organization (FAO), around 10 million hectares of forest disappeared worldwide every year between 2015 and 2020. As for the European Parliament, it estimates that food consumption in Europe, particularly palm oil and soy, is responsible for 10% of global deforestation.
But coffee-growing's contribution to the destruction of Ethiopia's forests is actually very limited. "The vast majority of it grows in agroforestry systems. A few trees are felled, but it's marginal," assured a connoisseur based in Ethiopia for a decade who wished to remain anonymous. "And 90% of growers respect regulations," he estimated, stressing that few chemical inputs are used in the plantations. Nevertheless, if they can't provide this necessary information to importers, growers risk losing their main customers.
In addition, the EU will require full traceability from the moment cherries are harvested and their arrival on European soil. "The harvests of hundreds of farmers are mixed together during drying, then washing, and again during the various stages of resale and transport. A single container of coffee en route to Europe can contain beans from a thousand producers, which means you'd have to provide a thousand GPS coordinates when it reaches Europe," said Peter Horsten, an adviser to AgUnity, a platform helping smallholders in emerging economies.
"More than half of Ethiopian exports to Europe are at risk," he continued. "Importers will turn to farms in Brazil, for example, because the traceability is easier to do." European companies whose imports don't meet the new standards face heavy penalties, amounting to at least 4% of their EU sales. As a result, buyers are already turning away from Ethiopia. "I see no way of buying significant quantities of Ethiopian coffee going forward," said Johannes Dengler, an executive at German roaster Dallmayr, in an interview with Reuters.
Struggling to diversify its export base
Described as "black gold," coffee is worshipped in Ethiopia – coffee ceremonies are omnipresent – and its export generates immense financial benefits. Coffee cherries are the main export product (37% by value) and the primary source of foreign currency. Its main destination is none other than Europe.
"We obviously don't want to lose the relationship with this market," said Adugna Debela, director of the Ethiopian Coffee and Tea Authority. Although Ethiopia is a relatively marginal partner for the EU (accounting for less than 5% of its imports), foreign currency from Europe is vital for Addis Ababa, wracked by an economic crisis marked by inflation and dollar shortages.
Brussels refused to grant the Ethiopian government an extension, pushing it to announce a plan to modernize its coffee sector. Addis Ababa would like to finance this program with the help of international partners. An anonymous source within the EU indicated that funds from Brussels could be allocated to Ethiopia's transition if Abiy Ahmed's government were to give signs of goodwill: "Even compared with other African players, Ethiopia is lagging behind. It has neither protected nor regulated its supply chain. Is this the Europeans' fault?"
Faced with the EU's inflexibility and the risk of seeing its exports plummet, the country of 120 million inhabitants finds itself with its back to the wall and struggling to diversify its export base. Although Chinese demand for coffee is enjoying strong growth, it concerns specialty and premium products, which are scant in Ethiopia.
The Dutch company JDE Peet's, Europe's leading coffee roaster, is developing a technology "combining satellite images and artificial intelligence" to determine from the air the major deforested and non-deforested areas before 2020. In theory, this territorial division would make it possible to identify coffee production eligible for export to Europe and avoid Ethiopia having to embark on a cumbersome procedure of manual surveys that would take several years. This system appears to be Addis Ababa's last chance, but it is not yet under consideration by the European authorities and could scare away importers.